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Why lululemon athletica, Big Lots, and United Natural Foods Slumped Today

By Dan Caplinger – Dec 7, 2018 at 4:35PM

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Even on a big down day, these stocks' losses were noteworthy.

Friday saw another terrible session on Wall Street, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all falling between 2% and 3%. Early on, stocks had actually gained ground, as a relatively tepid report on employment in November gave hope that the Federal Reserve might choose not to raise interest rates later this month at its upcoming monetary policy meeting. Yet market participants continued to worry about a possible end to the long economic recovery, with trade tensions again front and center. Moreover, some companies had bad news that sent their shares sharply lower. lululemon athletica (LULU 2.88%), Big Lots (BIG 6.42%), and United Natural Foods (UNFI 1.85%) were among the worst performers on the day. Here's why they did so poorly.

A tough day for Lululemon

Yoga-apparel retailer Lululemon saw its shares drop 13% after reporting its fiscal third-quarter financial results. By all accounts, Lululemon's numbers looked strong, with a 21% increase in revenue coming largely from a 6% rise in comparable-store sales. Net income soared 60% from year-ago levels as well. Yet despite encouraging signs of expense controls and store-network expansion, investors seemed to focus on Lululemon's guidance, which while higher than its previous forecast was nevertheless not quite up to what those following the stock had hoped to see. The move in the stock shows that even companies with good fundamentals are facing challenges given the market's volatility.

Sign with lululemon logo hanging from post sticking out of a brick wall.

Image source: Lululemon Athletica.

Big Lots goes down a lot

Big Lots stock plunged 23% in the wake of bad news in the discount retailer's third-quarter report. Comparable-store sales were up 3.4%, helping to send overall revenue higher by close to 4%. However, Big Lots suffered a surprisingly large loss, and CEO Bruce Thorn said that "we expect near-term results to be challenging this holiday season." Even though Thorn and his team remain optimistic that the Big Lots brand can withstand pressure in a tough environment, shareholders weren't willing to accept the downbeat expectations in a retail industry that's already competitive to cutthroat proportions.

United Natural gets a little less appetizing

Finally, United Natural Foods' stock closed lower by nearly 25%. The organic and natural products specialist said that sales were 17% higher during its fiscal first quarter compared to the year-ago period, with the recent acquisition of Supervalu accounting for about half of the revenue increase. But United Natural reported a loss for the quarter, and even taking out one-time items, earnings were down from last year's levels. Moreover, the company expects a high likelihood of posting a loss for the full fiscal year on an unadjusted basis, and unless the integration of Supervalu into its operations goes extremely well, United Natural could continue to have trouble recovering from its stock's swoon during the past several months.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Lululemon Athletica. The Motley Fool has a disclosure policy.

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